Not adding up? Why children’s financial education should start early

We live in a costly world and it’s important that children learn how to manage it from an early age. Primary school is a good place to start.

Starting early can help prepare children to learn healthy ways to manage their finances. Through the process, children can learn about everything within the financial world, including debt, mortgages, pensions and budgets.

According to the Money and Pensions Service (MaPS), an arm’s-length body of the UK Government: “Financial education is any activity that helps children develop the knowledge, skills and attitudes they need to manage money well, make informed financial decisions and achieve their goals. 

“It can cover a wide range of topics, responding to the needs of children, from recognising notes and coins, basic budget management and saving, to understanding the difference between needs and wants, the link between money and work and keeping money safe.”

Why should children’s financial education start in primary school?

In recent years, it has become clearer that at least a basic level of financial education needs to be included in school syllabuses, preferably as early as possible. 

Herminone McKee, chief financial officer (CFO) at SumUp, told Euronews: “As we look ahead to the next generation of young business leaders and entrepreneurs entering the workforce, it becomes increasingly evident that instilling financial literacy at a young age is a key component to success. 

“Despite the digital fluency that characterises ‘Gen Z’, studies indicate a concerning lack of financial literacy. Schools and parents alike should take care to take advantage of this new tech savvy generation to find innovative teaching methods and new means of technology that resonate with them. 

“Because financial literacy is not just about understanding interest rates or how to manage your taxes, it is the foundation for which solid business decisions are made. Something as simple as teaching the value of pocket money in primary schools for example, could be a prerequisite for making sound future investments or putting down a deposit for a house or a flat.”

Michael König, academic director of the Strategic Management for Executives Program at Vienna’s WU Executive Academy, told Euronews: “It should be as natural as swimming that children, from an early age onwards, get acquainted with some foundations of personal finance. Ideally, in primary school. 

“What are interest rates? What does inflation mean? What is the time value of money? How does one turn money into wealth, and what are the risks attached to this?”

Professor Carmela Aprea, director of the Mannheim Institute for Financial Education (MIFE), said: “Financial education could start in primary schools, but in a playful and low-pressure way. For example, children can reflect on their wishes, why something is important to them, and how they could achieve it. They can also look at what their parents do for a living and how and why they spent their money on different things.

“However, I think the most important thing that primary schools can do is equip children with basic skills in numeracy and literacy. These are the most important prerequisites for further learning and everything else in later life, including financial literacy. It should also be kept in mind that parents are the most important socialisation agents in childhood, and that important lessons regarding financial behaviour are learned by them.”

Erica Sandberg, consumer finance expert at BadCredit.org, said: “It is never too young to start teaching children about money! In the primary school years, you would start by just talking about the price of things they like, such as art supplies or swimming lessons, and what a sale is. 

“Drop it into normal conversation. It’s also a great time to explain to children why people go to work, which is to make sure they and their families are safe and secure.”

Education tech innovations helping to plug maths gap

Lucy Wayman, the maths consultant and school communications lead for 21C, a British company that has developed an AI-driven platform for students to learn maths and help teachers teach it, said children are beginning to form attitudes towards money from a very young age, even when in primary school.

“At 21C we understand that these perceptions will develop into a lifelong view of finances that will affect every aspect of their daily lives.

“It is crucial that, in this fast-evolving digital world, we equip children to develop sound financial awareness. Digital financial crime is rife, and growing. As a provider of digital technology, we also have a moral imperative to play our part in building children’s resilience towards financial risks.

“Having a robust understanding of mathematics is crucial to financial literacy. Being confident at estimating, calculating and comparing, mentally and at speed, reduces vulnerability to being scammed, and it develops a sound basis for interacting confidently in areas of finance.

“Without this, they leave themselves vulnerable to deception, and unable to make informed decisions about their own finances. By weaving realistic scenarios into school maths teaching, 21C ensures that children will not only learn subject matter to pass exams, but develop the practical skills needed for financial decision-making,” she said.

What are some key financial lessons that children should be taught from a young age?

Although teaching kids some financial knowledge in primary school is important, it’s also essential to keep these lessons age-appropriate, to ensure that children engage with the concepts as much as possible. 

Aaron Cirksena, founder and CEO of MDRN Capital, said: “Kids need to know the basics. They should learn what money is and where it comes from, pretty much like the ABCs of finance. We can introduce simple budgeting concepts so they understand how to divide their allowance into needs, wants, and savings. 

“Saving is an essential concept, even setting aside a small amount from their allowance can help. It’s all about giving them the tools to navigate their financial future.”

Sandberg said: “Instilling a positive attitude toward money is extremely important at this age. Never be judgmental or in any way ominous. You really want children to believe they will have control over their financial decisions, from earning money to saving and spending it.”

Erika Kullberg, founder of personal finance website Erika.com, said: “It’s so important to make sure your kids have a very strong understanding of how credit works before they enter the real world. At 18, they can qualify for a credit card, but it likely will have a very high interest rate and they can get into a lot of financial trouble if they aren’t crystal clear on how to use credit responsibly.”

Joe DiSanto, founder and chief executive officer (CEO) at personal finance website Play Louder, believes in a more hands-on approach with his son, instead of leaving it entirely to the school to install healthy financial habits. 

He said: “I’m teaching my son, who is in primary school, more about understanding the connection between hard work and earning rewards. He has to do certain chores as a member of the family, but we also offer him the opportunity to earn some money by doing extra chores – ones that he might find particularly unpleasant or less fun. He doesn’t get an allowance for his regular chores, but he can make money that he can spend as he chooses by opting to do the extra chores.

“Beyond that, I talk to him about making good or bad choices when spending money and explain that there’s an alternative to just earning and spending money. The alternative is investing, where money can turn into more money.

“I’ve introduced the stock market and investing to him in a simple way, and I’ve given him the option to invest his money if he wants. This has shown him that he doesn’t have to spend all of his money – he can invest it and potentially grow it. 

“In middle school, though, I could see introducing concepts like how to manage earned money, deciding what’s worth spending on, the difference between discretionary and required spending, and getting them attuned to these ideas. 

“After middle school, in high school, we could start discussing investing more seriously and teaching that it’s not just about working for money – we want to put our money to work for us, be entrepreneurial, and not just trade time for money.”

König said: “The perception of risk is really important. In a playful way, children should learn to understand what it means to spend, save or invest their pocket money. In our schools’ curricula, we still shy away from such ‘financial matters’. This, however, increases the vulnerability of the next generation: Without understanding basic finance, people easily fall prey to Ponzi schemes.”

What are some steps that schools and governments can take to support this?

Incentives to save for both parents and children, such as easier access to children’s savings accounts, are also important. 

Other ways schools and governments can help is by adapting financial education to the current generation, through platforms, apps and gamification, such as 21C’s Pocket Maths.

McKee said: “There are now so many apps on the market that support financial education for a range of ages, from those that are already used in schools from primary to secondary, to those that can be encouraged for use at home to gamify savings or budgeting, or even planning pocket money.”

Cirksena said: “They can start by incorporating financial literacy into subjects like math, social studies, or life skills classes. It’s also important to train teachers so they feel comfortable and equipped to teach these concepts. Maybe partnering with banks and financial organizations can provide resources and fun workshops. 

“They might also use interactive tools/apps to make learning about money feel like a fun game. If governments can make financial literacy a mandatory part of the curriculum, children can easily learns these essential skills much earlier in life.”

Professor Aprea added: “Schools and governments should invest in good materials and, above all, in good teacher education. And they should include parents in their financial education strategies, as they are so important for child development. Sometimes it also works the other way round.

“When children reflect on finances at school, for example, they also talk about it at the family dinner table and then parents suddenly become more interested in the topic. In any case, it is important to have a broader, systemic perspective not only on children but also on their whole living environment.”

Kullberg noted: “Most of us didn’t learn anything about how to create a budget, how credit cards and loans work, or how taxes work. If schools start teaching students these lessons before they enter the adult world, they are giving them a major leg up. Don’t be afraid to contact local politicians to advocate for financial education in your local schools.”

What implementation challenges could come up?

Although financial education has definitely been included a lot more in school curriculums in the last few years, there are still a number of implementation challenges to overcome before widespread adoption is likely. 

Aprea said: “One challenge is that it is time-consuming and costly to develop good financial education materials and to invest in teacher education. Secondly, financial education competes with many other subjects and skills that are equally important, such as health education or sustainability education. 

“Here it is important that we find creative ways to connect those issues, because they have one thing in common: Ultimately, they all revolve around the question of what constitutes a good life and by what means this can be achieved. 

“Another challenge is to address all relevant parts of the population, as some groups are not so easy to reach. And, finally, money is not a topic to talk about in many countries and it is often associated with shame, especially when people do not have much money. This is also a major challenge for implementation.”

Meanwhile, Cirksena noted: “One big challenge is the lack of a standardised curriculum; if schools are teaching financial literacy differently, there might be a disconnect. Teacher preparedness is also a concern – if they’re not comfortable teaching these concepts, it can lead to gaps in what kids learn. 

“In regard to socioeconomics, kids from lower-income families might have different experiences with money, making it harder to create lessons that resonate.Parents also play a role if they aren’t reinforcing these lessons at home.”

Sandberg added, meanwhile, that on a macro level, change is slow. “As a teacher, I wouldn’t wait for personal finance to be mandated. If you have discretion about which books you read to children during story time, elect those that address money in a fun way.”